HBM Pharma Biotech M&a Report 2012

1

HBM Pharma/Biotech M&A Report 2012

Summary Results

In 2012, trade sales of North American and European

pharma and biotech companies generated an upfront

transaction volume of $43.5 billion. This was lower than

the deal volumes reported in 2011 and 2010 ($63.5 billion

and $66.9 billion). However, the number of transactions in

2012 (72) was in line with previous years (69 in 2011 and

78 in 2010). If one excludes transactions over $10 billion

(1 in 2012, 2 in 2011 and 1 in 2010), then 2012 looks quite

strong with $32.3 billion of transaction volume (vs. less than $30 billion in 2011 and in 2010).

The number of public takeovers during 2012 dropped to 12 (vs. 20 or more in the years before), whereas

the number of private deals reached 60 transactions. These private transactions generated an upfront deal

volume of $14.6 billion (only surpassed by the $20.8 billion upfront in 2011).

M&A activity in the US remained strong with 48 deals

generating an upfront transaction volume of $32.5 billion

(vs. $42.7 billion in 2011 from 39 deals). Europe reported

significantly lower transaction volume in 2012

($10.4 billion) as compared to the year before when M&A

deal volume reached $20.6 billion (which included the

$13.7 billion buyout of Nycomed by Takeda).

North American large pharma and biotech firms as well as

specialty pharmas were clearly the dominant buyers during

2012, shelling out two thirds of the transaction dollars in more than 40 deals. Valeant bought 5

biopharma companies in 2012, followed by Amgen (3) and Takeda (3).

While the number of exits for VC-backed companies (28) was in line with past years, significantly more

private equity-backed companies were sold in 2012 (10 vs. 3 such transactions each in 2011 and in 2010).

6 of these exits were in the US, 4 in Europe. Total deal value here reached $10.5 billion.

US VC-backed biopharma companies continued to attract more interest from buyers then their European

counter-parts (22 US deals vs. 5 European deals1). Overall

upfront paid for VC-backed companies was $3.4 billion.

Total transaction volume including contingent payments

reached a new high of $8.3 billion (two transactions had a

biodollar value of $1 billion or more each).

The returns from VC-backed trade sales during 2012 were

stronger than ever driven by the excellent performance of

some US exits. The average multiple to investors from

upfront payments alone (for the 15 transactions where

such a multiple could be estimated) reached 5.7x (the

median was 3.5x).

1 Plus one Canadian VC-backed company sold in 2012 (Enobia)

Total 2012 deal value lower than in 2011 and 2010. Fewer public takeovers, but high number of private transactions.

M&A activity strong in the US, weaker in Europe. US buyers dominate. Specialty pharma buyers very active. Valeant (Canada) buys 5 companies.

Private equity funds sold 10 pharma companies. High deal volume (incl. contingent payments) for VC-backed companies.

Strong returns for US VC investors.


2

Trade Sales of Public and Private Biopharma Companies in 2012

In 2012, the sale of 73 North American and European biopharma companies generated an upfront

transaction volume of $43.5 billion, or $49.3 billion if one includes contingent payments. Compared to

previous years, the overall deal volume was thus lower mainly due to the smaller number of public take-overs

(12 vs. over 20 in the years before) and the absence of a “mega deal”.

Biopharma M&A Upfront Transaction Volume (US, Canada, Europe)

4Source: HBM Pharma/Biotech M&A Report HBM Partners

(Upfront) Transaction Volumes of Pharma/Biotech Trade Sales

4.0 3.6 6.4 2.4 2.5 4.0 5.013.9

13.710.4

0.71.9

0.37.5 6.9

2.10.7

11.441.5

11.3

39.311.4 15.2

22.6

17.7

35.0

29.611.0

155.4

41.2

20.1

11.2

0

20

40

60

80

100

2005 2006 2007 2008 2009 2010 2011 2012

Up

fro

nt

Tran

sact

ion

Vo

lum

e ($

bill

ion

)

Public companies (> $10bn)

Public companies

Other private companies

Private companies (>$10bn)

VC/PE-backed private companies

$80.8 bn

Public & Private Pharma/Biotech Companies (US, Canada, Europe)

Pfizer/Wyeth

Merck/Schering P.

Roche/Genentech

Novartis/Alcon

(minority/option)

AstraZ./Medimmune

Schering P./Organon

Merck KGaA/Serono

Bayer/Schering AGTakeda/

Nycomed

$66.9 bn$63.5 bn

$177.1 bn

$52.7 bn$49.2 bn

$25.7 bn

The Alcon/Novartis transaction was recorded with $11 billion in 2008 (minority purchase) and with $41.1 billion in 2010.

$43.5 bn

Novartis/Alcon

Gilead/

Pharmasset

Sanofi/Genzyme

The HBM Pharma/Biotech M&A Report covers all completed trade sales of US, Canadian and European biotechnology and pharma (incl. generics and OTC) companies since 2005 to the end 2012. While providing some top line results for public and private transactions, the analysis focuses mainly on trade sales of private venture- or private-equity-backed companies (called “VC/PE-backed companies” in this report). The report also includes acquisitions of biopharma companies by PE- or buyout investors.

The survey does not cover diagnostics, medical technology or life sciences tools & services companies. Reverse mergers, minority investments and the purchase of assets or subsidiaries are not included in the survey. Acquisitions that were structured as mergers for tax or other reasons are included.

Unless mentioned otherwise, transaction volume is defined in this report as the upfront consideration in cash and/or shares. The total transaction value includes contingent (“biodollar”) payments linked to reaching certain milestones.

Additional data such as investment by VCs, exit multiples, stage of lead product etc. were collected from various sources. Please note that such data may be based on estimates and may not have been available for all transactions. Also, the results presented in this report may deviate from earlier reports due to subsequent reclassification or correction of data.

Further information about the HBM Pharma/Biotech M&A Report including a list of all transactions can be found under www.hbmpartners.com/report. The use of data and charts is permitted with reference to “HBM Partners Pharma/Biotech M&A Report”.

http://www.hbmpartners.com/report


3

While transaction volume in 2012 was relatively low, the overall number of biopharma M&A transactions was

in line with previous years, driven by a high number of private transactions (including a record number of

trade sales of private equity-backed pharma companies, mainly former buyouts).

Number of Biopharma M&A Deals (US, Canada, Europe)


Number of Pharma/Biotech Trade Sales by Year

32 29 31 2719

29 28 28

31 2

1

3 310

2424

27

1318

26

15

22

13 19 11

25

12

13

17

119

14

6

61

0

10

20

30

40

50

60

70

80

2005 2006 2007 2008 2009 2010 2011 2012

# o

f Tr

ansa

ctio

ns

Public companies >$100m


PE-backed private companies

VC-backed private companies

Public companies <$100m value

(not in survey before 2008)


Significant Transactions in 2012

The number of transactions with an upfront of at least $100 million was again very high in 2012. The number

of $100+ million private deals significantly increased in 2012 due to the 10 PE-backed company exits1 (with a

median deal value of over $500 million).

Number of Biopharma M&A Deals With an Upfront of at Least $100 Million (US, Canada, Europe)


Number of Pharma/Biotech Trade Sales >=$100m Upfront Transaction Volume

10 812

9 9 10 12 12

3

1

2

13

3

104

3

7

1

65

5

31319

11

25 1213

1711

0

10

20

30

40

2005 2006 2007 2008 2009 2010 2011 2012

# o

f Tr

ansa

ctio

ns

Public companies


PE-backed private companies

VC-backed private companies


1 While no transaction values for the secondary buyout of Aenova by BC Partners from Bridgepoint were disclosed, it

can be assumed that this transaction was valued clearly above $100 million.


4

In 2012, there were 9 deals with an upfront transaction volume of over $1 billion each. The largest deal was

the purchase of NASDAQ-listed Pharmasset by Gilead Sciences for $11.2 billion. Pharmasset has several

clinical programs in hepatitis C with the most advanced product in phase III. Two private trade sales, both

companies backed by private equity, also reached values over $1 billion: Generics company Actavis

(Switzerland) was sold to Watson for $5.6 billion and dermatology company Fougera, a spin-off from

Nycomed (sold in 2011 for over $13 billion), was picked up by Sandoz/Novartis for $1.5 billion.

Largest Biopharma M&A Transactions in 2012 (US, Canada, Europe)

TargetVC/PE-

BackedBuyer

Upfront Value

($ million)

Total Value

($ million)

1 Pharmasset (US) Public Gilead Sciences (US) 11'200 11'200

2 Actavis (CH) Private PE Watson Pharmaceuticals (US) 5'600 5'920

3 Amylin (US) Public Bristol-Myers Squibb (UK) 5'300 5'300

4 Human Genome Science (US) Public GlaxoSmithKline (UK) 3'600 3'600

5 Medicis Pharmaceutical (US) Public Valeant (Canada) 2'600 2'600

6 Inhibitex (US) Public Bristol-Myers Squibb (US) 2'500 2'500

7 Fougera (US) Private PE Novartis (CH) 1'525 1'525

8 Ardea Biosciences (US) Public AstraZeneca (UK) 1'260 1'260

9 Micromet (Germany) Public Amgen (US) 1'160 1'160

10 URL Pharma (US) Private PE Takeda (J) 800 800

11 Mercury Pharma (UK) Private PE Cinven (UK) 732 732

12 EUSA Pharma (UK) Private PE Jazz Pharmaceuticals (US) 650 700

13 Enobia (Canada) Private VC Alexion (US) 610 1'080

14 Amdipharm (Ireland) Private Cinven (UK) 590 590

15 Azur Pharma (Ireland) Private PE Jazz Pharmaceuticals (US) 580 580

16 Ista Pharmaecuticals (US) Public Bausch & Lomb (US) 500 500

17 deCode Genetics (Iceland) Private Amgen (US) 415 415

18 Avila Therapeutics (US) Private VC Celgene (US) 350 545

19 SkinMedica (US) Private VC Allergan (US) 350 375

20 Proximagen (UK) Public Upsher-Smith (US) 347 553

21 Kai Pharmaceuticals (US) Private VC Amgen (US) 325 325

22 Orapharma (US) Private PE Valeant (Canada) 312 426

23 NextWave (US) Private VC Pfizer (US) 255 680

24 Dusa Pharmaceuticals (US) Public Sun Pharmaceuticals (India) 230 230

25 Allos Therapeutics (US) Public Spectrum Pharmaceuticals (US) 206 206

26 Boston Biomedical (US) Private VC Dainippon Sumitomo (Japan) 200 2'630

27 JHP Pharmaceuticals (US) Private PE Warburg Pincus (US) 195 195

28 Airborne (US) Private PE Schiff Nutrition (US) 150 150

29 EKR Therapeutics (US) Private VC Cornerstone Therapeutics (US) 125 150

30 Elevation Pharmac. (US) Private VC Dainippon Sumitomo (J) 100 400

31 FerroKin (US) Private VC Shire (Ireland) 100 325

32 CorImmun (Germany) Private VC Johnson & Johnson (US) 100 200

33 CNS Therapeutics (US) Private VC Mallinckrodt (US) 100 100 Comment: CH = Switzerland. Green shading = trade sales of VC-backed companies. Grey shading = trade sales of PE-backed companies.

Also see list of all transactions: www.hbmpartners.com/report.

In 2012 there were also quite a number of larger exits of VC-backed biopharma companies. This list – ranked

by upfront consideration – is topped by Canadian orphan disease company Enobia sold to Alexion in a

transaction that could reach $1 billion if all milestones are met. Second was derma company SkinMedica

which was picked up by Allergan for $350 million. The sale of Boston Biomedical to Dainippon Sumitomo

reached the highest-ever biodollar value ($2.63 billion) of a VC-backed company.

http://www.hbmpartners.com/report


5

Premiums Paid for Public Biopharma Companies 2009 – 2012 (Takeover Value >=$100 million)


Premiums Paid for Public Biopharma Companies 2008 – 2012

2.6

0.4

46.8

1.41.0

0.4

2.22.6

66.7

42.0

0.3

1.9

0.3

0.5

0.1

4.03.3

0.9

0.6

2.9

0.1

0.30.3

1.1

0.6

1.2

2.3

3.6

20.1

0.5

0.9

0.4

0.2

3.4

0.4

6.8

0.20.2

0.1

2.5

11.2

1.31.2

0.5

3.6

5.3

0.3

0.2

2.6

0.2

6

45

2625

1622

90

2532

4449

34

606764

55

15

84

74

1719

28

160

35

9

18

58

40

4841

7

26

5

53

80

39

6

71

163

89

54

33

10

99

1016

27

3938

0

50

100

150

200

0.0

0.1

1.0

10.0

100.0

Zentiva

Indevu

s …

Genente

ch

CV

Thera

peu

tics

Cougar …

Nove

n …

Medare

x

Sepra

cor

Wye

th

Schering P

lough

Gold

shie

ld G

roup

Chattem

Bio

Form

Medic

al …

Facet

Bio

tech …

Jave

lin …

OS

I P

harm

a

Vale

ant

Zym

oG

en

etics

Movetis

Abra

xis …

Penw

est

Bio

com

patib

les

Cyp

ress …

Mart

ek

Eura

nd

Q-M

ed

Cru

cell

Kin

g …

Genzym

e

Pro

str

akan

Clin

ical

Data

Inspire

Cara

co

Tale

cris …

AB

Sanitas

Cephalo

n

Anadys

Adolo

r

Nova

gali

Inhib

itex

Pharm

asset

Ard

ea B

ioscie

nces

Mic

rom

et

Ista

…

Hum

an G

enom

e …

Am

ylin

Pro

xim

ag

en

Allo

s T

hera

peutics

Medic

is …

Dusa …

% P

rem

ium

Pa

id

De

al V

alu

e $

billio

n

Deal value $ bn

Premium in %

2009 2010 2011 2012

33%47%

56% 52%

Premium of purchase price compared to the stock price before the deal announcement

Comment: Public takeovers of US, Canadian and European biopharma companies with an upfront transaction value of at least

$100 million. Premium of takeover price as compared to the last stock price before the announcement of the deal.

Premiums Paid for Takeovers of Public Biopharma Companies

The premiums paid for public biopharma companies since 2009 have increased to over 50% (premium of takeover price as compared to the last stock price before the deal announcement). As the chart below shows, there is a high degree of variance in these premiums. Any general conclusion from the data therefore should be interpreted with caution. Nevertheless, a few interesting observations can be made:

The 10 public biotechs sold that had significant biologics assets (antibodies etc.) were able to command on average a premium of 67% (vs. the 47% average for all 50 public takeouts in this analysis).

The 10 pre-commercial companies (phase II and III) also were rewarded with a higher premium (over 70% on average).

Premiums paid for US public companies (38 deals) were on average 10% higher than the premiums paid for European firms (12 deals).

The only therapeutic category that yielded significantly higher premiums was anti-infectives: The average premiums paid for the 5 companies in that field were over 100%.

No correlation between size of transaction (i.e. size of company) and premiums was observed.


6

Location of Buyers / Type of Buyers

In contrast to previous periods, M&A deal making in 2012 was clearly dominated by North American (mostly

US) buyers who generated over two thirds of transaction volume.

Location of Buyers


Pharma/Biotech Trade Sales - Location of Buyers

10.2 18.3 20.5 12.4 8.1 12.3 13.628.8

108.7

14.7

61.8

23.830.5

56.9

50.534.3

13.30.9

0.7

4.9 10.1

3.2

4.4

15.61.4

0

20

40

60

80

100

120

140

160

180

2005 2006 2007 2008 2009 2010 2011 2012

Up

fro

nt

Tran

sact

ion

Vo

lum

e ($

bill

ion

)

Asian / ROW buyers

European buyers

North American Buyers


Pfizer/Wyeth

Merck/Schering P.

Comment: Trade sales of public and private pharma/biotech companies US, Canada and Europe

Also, large pharma’s share of deal volume declined significantly in 2012 for several reasons: There were no

mega transactions as in the years before. The largest deal in 2012 was consummated by Gilead (classified as

“Large Biotech”) and Amgen, the world’s largest biotech, also bought 3 companies in 2012. In addition,

smaller and medium-sized pharma companies were again very active buyers in 2012 with 30 acquisitions and

a record deal volume of $12.5 billion.

Share of M&A Upfront Transaction Volume by Type of Buyer


58%

72%81% 81%

96%

82% 78%

38%

15%

13%2%

1%

6%

2%

30%

17%

14% 15%9%

2%11%

18%

27%

5%

2%

3%

1% 1% 1%6% 7%2% 4%

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009 2010 2011 2012

% o

f (U

pfr

on

t) T

ran

sact

ion

Vo

lum

e

Other

Small biotech

Small & mid-sized pharma

Large biotech

Large pharma

Buyers of VC-Backed Private Pharma/Biotech Companies (% Trans. Vol.)

Private & Public Pharma/Biotech Companies (US, Canada, Europe)

Comment: Trade sales of public and private pharma/biotech companies US, Canada and Europe


7

The table below shows that small and medium-sized pharma companies, which have been active buyers of

other biopharma companies for the years covered by our report, have become very important as a buyer

group.

Number of M&A Transactions by Type of Buyer (Transactions with >=$100 Million Upfront)

Buyer Group

Large Pharma 2005-08 2009 2010 2011 2012 2009-12

VC-Backed 25 5 6 5 4 20

PE-Backed & Other Private 3 4 1 1 3 9

Public 32 8 7 6 5 26

Total 60 17 14 12 12 55 0 0

Large Biotech 0 0

VC-Backed 6 1 3 3 2 9


Public 7 1 1 0 2 4

Total 15 2 5 3 5 15 0 0

Small & Mid-Sized Pharma 0 0

VC-Backed 6 3 1 3 4 11


Public 21 2 5 9 3 19

Total 42 8 11 19 12 50 0 0

Small Biotech 0 0

Private 2 0 1 1 0 2

Public 6 0 0 0 1 1

Total 8 0 1 1 1 3 Comment: Trade sales of public and private pharma/biotech companies US, Canada and Europe >=$100 million upfront

Trade Sales of Private Biopharma Companies

60 private biopharma companies were sold in 2012, on par with the 60 transactions in 2007. Deal volume

was also high driven by the $5.6 billion acquisition of Actavis by Watson and other significant exits for PE-

backed companies. Upfronts paid for the 28 VC-backed companies were down slightly from 2011. The 23

other private (mostly family-owned) pharma companies sold generated a low overall deal volume in 2012.

However, it should be mentioned that terms for some of these trade sales are not disclosed.

Trade Sales of Private Biopharma Companies (US, Canada, Europe)


Trade Sales of Private Pharma/Biotech Companies

2.6 3.1 4.02.4 1.9 2.3

4.1 3.41.4 0.6

2.4

0.61.7

14.6

10.510.4

0.7

1.9

0.3

7.56.9

2.1

0.7

5954

60

40 38

58

46

61

0

10

20

30

40

50

60

70

0

5

10

15

20

25

2005 2006 2007 2008 2009 2010 2011 2012

# o

f T

ran

sact

ion

s

Tra

nsa

ctio

n V

olu

me

($ b

illio

n)

VC-backed co's PE-backed co's Other private co's

Private Pharma/Biotech Companies (US, Canada, Europe)

incl. $13.7 bn

Nycomed/Takeda

incl. $5.6 bn

Actavis/Watson


8

Trade Sales of Private PE-Backed Biopharma Companies (US, Canada, Europe)


Trade Sales of PE-Backed Private Pharma/Biotech Companies

1.4 0.62.4

0.61.7

14.6

10.5

3

1

2

1

3 3

10

0

5

10

15

0

5

10

15

2005 2006 2007 2008 2009 2010 2011 2012

# o

f Tr

ansa

ctio

ns

Tran

sact

ion

Vo

lum

e ($

bill

ion

)

Upfront transaction value

Private VC/PE-Backed Pharma/Biotech Companies (US, Canada, Europe)

incl. $13.7 bn

Nycomed/Takeda

incl. $5.6 bn

Actavis/Watson

More details on the exits of PE-backed biopharma companies in 2012 can be found on the next page.

Within the “Other Private Company” segment, the only significant transaction reported in 2012 was the

acquisition of UK generics company Amdipharm by UK buyout house Cinven for $590 million. All other

transactions were below $100 million.

Trade Sales of Other Private (Not VC/PE-Backed) Biopharma Companies (US, Canada, Europe)


Trade Sales of Other Private Pharma/Biotech Companies

10.4

0.71.9 0.3

7.56.9

2.1 0.7

24 24

27

13

18

26

15

22

0

10

20

30

0

5

10

15

2005 2006 2007 2008 2009 2010 2011 2012

# o

f Tr

ansa

ctio

ns

Tran

sact

ion

Vo

lum

e ($

bill

ion

)

Upfront transaction value

Private VC/PE-Backed Pharma/Biotech Companies (US, Canada, Europe)

incl. $8.3 bn

Hexal/Novartis

incl. $5.0 bn

Ratiopharm/Teva

incl. $3.3 bn

Stiefel/GSK


9

Trade Sales of Private Equity-Backed Pharma Companies During 2012 (ranked by transaction value)

In 2012, private generics company Actavis was acquired by Watson for $5.6 billion plus contingent payments of approx. $300 million. The deal closed in July 2012. This transaction creates the #3 global generics company. Actavis, headquartered in Switzerland, was acquired in 2007 by Novator, the investment vehicle of Thor Bjorgolfsson, an Icelandic billionaire with substantial leverage provided by Deutsche Bank which is reported to have taken control of the company in 2010. It is rumored that Deutsche Bank lost over $1 billion in this transaction (and equity investors probably lost most or all of their investment).

Fougera, a leading US dermatology generics company, was acquired in May 2012 by Sandoz/Novartis for $1.5 billion in cash. Fougera, formerly a division of Nycomed, was spun off in 2011 when Nycomed was sold to Takeda for over $13 billion. Sales of Fougera were reported as $429 million. The main investors in Fougera (and Nycomed) were Nordic Capital, DLJ Credit Suisse and Avista Capital. No return figures are available from the Fougera transaction, but the overall Nycomed deal should have generated great returns for investors, most of all for Nordic Capital which was the lead investor in Nycomed.

URL Pharma, a US specialty pharma company, was acquired in June 2012 by Takeda for $800 million in cash and undisclosed contingent payments. URL had sales of around $500 million. Takeda was mainly interested in URL's gout product (Colcrys) that was approved in 2009 and had net sales of over $400 million in 2011. In 1997, Elliott Associates and Momar Corporation purchased a majority of URL. No investment or return figures were reported, but it is believed that investor returns have been excellent (even though the holding period was about 15 years).

Mercury Pharma was acquired in August 2012 by Cinven, a UK buyout group, for £465 million ($732 million). The company focusing on generics was bought by UK private equity house HG Capital in 2009 for £187 million ($285 million). This secondary buyout has yielded a multiple of around 3x to HG within a relatively short time period. The company was reported to have sales of £100 million. Cinven accounced that it plans to combine Mercury Pharma with Amdipharma, which was acquired later in 2012.

In June 2012, US Jazz Pharmaceuticals completed the acquisition of EUSA Pharma (UK) for $650 million in cash plus contingent milestone payments of $50 million. EUSA was founded in 2006 by pharma executives and US investor Essex Woodlands to acquire specialty and/or orphan products. Sales of EUSA in 2011 were $95 million. The company raised approx. $225 million of equity mainly from European VCs and $55 million of debt. While no return figures have been published, the multiple to investors is believed to be between 2.5x and 3x.

Azur Pharma, an Irish specialty pharma company with products in pain and women's health, merged with US-listed Jazz Pharmaceutcials in January 2012. Azur Pharma's shareholders will own 20% (valued at around $580 million) of the combined company Jazz Pharmaceuticals plc, to be located in Ireland. Azur was founded in 2005 by former Elan executives to acquire specialty pharma assets and was backed with over $150 million by private investors. While no return figures are available, it is believed that investors - based on the current valuation of Jazz - have seen an increase of over 3x in value.

In June 2012, acquisitive Valeant purchased US Orapharma for $312 million of cash plus $114 million of contingent payments. Orapharma, a leading dental anesthesia and dental health company, was purchased by Water Street Healthcare from Johnson & Johnson in 2010. Water Street reportedly invested around $100 million in the deal. No investor returns are available, but it is estimated that Waterstreet made a 2x-3x on the upfront consideration.

At the end of December 2012, JHP Pharmaceuticals was acquired by private equity firm Warburg Pinucs in a $195 million deal. JHP, a specialty pharma company, founded in 2007, was financed by Morgan Stanley Principal Investments. The company is a contract manufacturer and seller of branded and generics injectables. No return estimates on Morgan Stanley's investment are available.

The US immune support supplement producer Airborne was purchased in April 2012 by publicly-listed vitamin maker Schiff Nutrition for $150 million in cash. The company, founded in the 1990s, had an eventful history including several ownership changes and lawsuits including a $30 million settlement payment to the Federal Trade Commission. Airborne was owned temporarily by Summit Partners and in 2009 was taken over by private equity firm CF Capital. Return figures are not available.

In August 2012, BC Partners acquired German Aenova, a leading producer, developer and seller of solid dosage form medicines, from Bridgepoint, which invested in the company in 2005. The terms of this secondary buyout were not disclosed. Sales of Aenova are reported to be €250 million with 1600 employees. The company is catering its services and products to other pharma companies concentrating on generics and OTC products, among others.


10

Trade Sales of VC-Backed Biopharma Companies

The number of VC-backed biopharma companies sold in 2012 was in line with previous years. While the

upfront transaction volume was lower than in 2011, the total volume including contingent payments reached

a new high of $8.5 billion. As noted previously, Boston Biomedical’s potential deal value was $2.63 billion

and Enobia could also become a billion-dollar deal if all milestones are met.

Trade Sales of VC-Backed Biopharma Companies (US, Canada, Europe)


Trade Sales of VC-Backed Private Pharma/Biotech Companies

2.6 3.14.0

2.41.9 2.3

4.13.43.3 3.5

4.83.7

5.1 4.7

6.7

8.3

32

2931

27

19

29 28 28

0

10

20

30

40

0.0

2.5

5.0

7.5

10.0

2005 2006 2007 2008 2009 2010 2011 2012

# o

f Tr

ansa

ctio

ns

Tran

sact

ion

Vo

lum

e ($

bill

ion

)

Upfront transaction value Total value

Private VC-Backed Pharma/Biotech Companies (US, Canada, Europe)

The upfront consideration from trade sales of VC-backed biopharma companies in 2012 averaged

$174 million per deal, below the $203 million in 2011. The median upfront value in 2012 was $100 million,

compared to $115 million in 2011.

Trade Sales of VC-Backed Biopharma Companies (US, Canada, Europe)


123

170196

137

317

156

333

117

151176

88

134

88

203174

49 55 6239

63 5673 70

0

50

100

150

200

250

300

350

400

2005 2006 2007 2008 2009 2010 2011 2012

Ave

rag

e V

alu

es ($

mill

ion

)

Average Total Transaction Value

Average Upfront Transaction Value

Average Invested Capital

Average Investment / Average Upfront and Total Deal Values

Only for transactions where respective

information was available.

VC-backed companies only.

Number of transactions

where investment amounts

and transaction values

were available

21 20 22 21 16 20 20 18

440



11

Average total deal values (including biodollars) rose to $440 million in 2012. This number is skewed by the

potentially very high deal value of Boston Biomedical. Therefore, median numbers are more meaningful here

($200 million in 2012 vs. $212 million in 2011).

It is interesting to note that the average total VC investment into the companies that were sold in 2011 and

2012 was higher than in previous years indicating that investors are prepared to (or need to) invest more

until a company reaches the exit stage.

Estimated Returns to Venture Investors

Wherever available, HBM is collecting additional information about biopharma trade sales that allows an

estimate of (venture) investors’ returns in such transactions. While the biotech IPO market is open again – at

least in the U.S. – step-ups from private to IPO valuations have been modest. Thus, a trade sale continues to

be the preferred exit route.

A rough estimate of investor return is the ratio between upfront or total proceeds from a trade sale divided by

invested capital. Furthermore, in some transactions, we estimated the step-up from the average valuation

paid by private investors to the exit valuation (upfront transaction volume).

It should be noted that the ratios mentioned above and the return estimates were only available for about

70% of the deals. Also, one or two good exits can significantly drive up average values. Median return

multiples are thus substantially lower.

Return Estimates for Venture Investors from VC-Backed Trade Sales (US, Canada, Europe)


Ratio of Deal Values to Invested Capital / Average & Median Multiples




3.1 3.23.4 3.5

5.1

3.7

4.6

6.4

2.42.7 2.8

2.2 1.91.7

2.72.5

2.1 2.1 2.32.0 2.1

2.5

3.7

5.7

1.62.0

1.81.5

2.0

1.0

2.5

3.5

0

1

2

3

4

5

6

7

2005 2006 2007 2008 2009 2010 2011 2012

Rat

io /

Mu

ltip

le

Total Deal Values/Invested Capital

Upfront Deal Values/Invested Capital

Average Investor Multiples (on Upfront)

Median Investor Multiples (on Upfront)

These multiples

are weighted by

invested capital


Comment: For VC-backed company trade sales where respective information was available.

The ratio of total value (including biodollars) to invested capital was about 3x until 2007 and then increased

substantially as contingent payments became more prevalent. This ratio reached a new high in 2012 of 6.4x.

If one excludes Boston Biomedical, where investors could get up to 40x of the invested capital, this ratio

drops to 4.3x, still a good number.

The ratio of upfront proceeds to invested capital inched up to 2.8x between 2005 and 2007 and then dropped

to a low of 1.7x in 2010. The ratio jumped back to over 2x in 2011 and 2012. The gap between multiples from

upfront and the maximum multiple widened substantially in 2009 and the following years as milestone-driven

deals became more prevalent.


12

The estimated return multiples, i.e. upfront proceeds to private valuations, show a similar development. The

multiples were stable at around 2x until 2009 and since then have shown a healthy increase.

Overall, returns to VC investors clearly have been on the upswing since 2009 (both in the US and in Europe,

see below). However, US deals have generated substantially better returns during the last 4 years.

Return Estimates for Venture Investors from VC-Backed Trade Sale (US vs. Europe)


Estimated Investor Return Multiples – US vs. European Trade Sales

1.9x 2.0x

3.1x

1.8x

2.4x

3.1x

4.1x

6.7x

2.3x 2.4x

0.8x

2.6x

1.3x

1.7x

2.3x2.7x

0x

1x

2x

3x

4x

5x

6x

7x

2005 2006 2007 2008 2009 2010 2011 2012

Est

imat

edM

ult

iple

s

Estimated multiples US (Average)

Estimated multiples Europe (Average)

Europe:

Only 3 deals

with return data!



3.5xMedian

1.5xMedian


Multiples of average

private valuations to

upfront transaction

value



Stage of VC-Backed Biopharma Companies at Time of Trade Sale

Since 2007, the number of pre-clinical acquisitions has generally declined and the number of acquisitions of

companies with phase III programs or approved products has shown an increase. As mentioned in previous

reports, we observed no systematic impact of company stage on investor returns.

Stage of Lead Program at Time of Trade Sale (VC-Backed Co’s US, Canada, Europe)


1310

13

9

58

2

6

3

4

4

7

1

4

3

4

68

8

6

9

6

10

9

4 3

2

2

1

3

3

2

22

2

2

1

48

6

0

5

10

15

20

25

30

2005 2006 2007 2008 2009 2010 2011 2012

# o

f Tr

ansa

ctio

ns

Market

Phase III / NDA

Phase II

Phase I

Pre-clinical

Trade Sales of VC/PE-Backed Biopharma Companies by Stage of Lead Product





Comment: Only for transactions where stage of lead product at the time of trade sale was available.


13

In line with the trend to later-stage M&A deals are two further observations:

(1) Press releases of recent acquisitions rarely mention “platform” or “technology” as a reason for the

acquisition. Usually one or more products (in various stages of development) are highlighted. We have

analyzed the M&A press releases since 2005 and the chart below clearly confirms the trend towards “product

deals” (vs. “technology deals”).

Main Reasons for Acquisition (as Mentioned in Press Releases)


14

11

18

14

3

7 7

3

2324

23

18

16

2524

21

0

5

10

15

20

25

2005 2006 2007 2008 2009 2010 2011 2012

# o

f Tr

ansa

ctio

ns

Platform or technology Product(s)

Main Reasons for Acquisition (as mentioned in press releases)






(2) The time from founding of a company to trade sale has significantly increased since 2005. Whereas the

average “time to exit” was a bit more than 5 years in 2005 it now has increased to almost 9 years, indicating

that VC-backed biopharma companies have to develop their products in later-stage clinical trials before they

can orchestrate a trade sale.

Time From Company Foundation to Trade Sale


Years From Company Founding to Trade Sale

5.2

5.7

6.4

8.0

6.8

7.5

8.5

9.0

4

5

6

7

8

9

10

2005 2006 2007 2008 2009 2010 2011 2012

Yea

rsto

Trad

e S

ale

Time from company founding to trade sale







14

Outlook

While 2012 was not the strongest M&A year in terms of transaction volume, industry participants will

nevertheless look back at 2012 as a “good” M&A year with a high number of significant transactions,

especially in the private sector. Private deals mostly produced good returns for venture- and private-equity

investors.

Medium-sized pharma companies have become very active in the M&A market on the buy side and we expect

this to continue in 2013.

As the biotech IPO window is open again (in the US), US biopharma companies have an alternative exit route

now, even though in most cases a trade sale is still preferred. As the public stock performance in the sector

has been strong, public biopharma companies might look less attractive and interested buyers turn more

towards private targets.

The high number of larger exits for PE-backed pharma companies will certainly increase the appetite for

buyouts groups to engage more in the sector. As buyout firms prefer to acquire well-established private

companies or divisions of larger companies, we do not expect buyout houses to pick up VC-backed

biopharma companies.

Pharma/biotech M&A activity will focus mainly on the US and the emerging markets. European companies

with unique products that can be sold worldwide also represent attractive targets. We have not seen yet a

sell-out of smaller pharma companies in Southern Europe, i.e. in the countries which have been most

affected by the “Euro crisis”.

The good number of significant M&A transactions already announced during the first weeks of the New Year

lead us to believe that 2013 could again be a strong M&A year for the pharma/biotech sector.

January 2013

Please address questions, comments or corrections to the authors of this report:

Dr Ulrich Geilinger, [email protected] and Dr Chandra P. Leo, [email protected]

HBM Partners AG, CH-6300 Zug, Switzerland, phone +41 43 888 71 71

About HBM Partners

HBM Partners is a globally active, healthcare-focused investment management group headquartered in Switzerland. HBM Healthcare Investments AG and funds advised by HBM invest in private and public companies across North America, Europe, India and China. Since 2001, HBM has generated more than 40 trade sales and IPOs of pharma/biotech, medtech and diagnostics companies.

More information can be found at www.hbmpartners.com.

mailto:[email protected]

mailto:[email protected]

http://www.hbmpartners.com/

HBM Pharma Biotech M&a Report 2012

Documents

Transcript of HBM Pharma Biotech M&a Report 2012